Vegoils Palm slips to 2-wk low on oversupply fears; investors gear up for 2014 trade

by **Cals** Tue 07 Jan 2014, 00:26

Vegoils Palm slips to 2-wk low on oversupply fears; investors gear up for 2014 trade

Business & Markets 2013

Written by Reuters

Monday, 06 January 2014 18:43

KUALA LUMPUR (Jan 6): Malaysian palm oil futures slipped to a two-week low on Monday as forecasts of bumper supplies from the world's top palm producers continued to weigh on investor sentiment, while weak competing overseas markets also pressured prices.

Indonesia and Malaysia -- which together account for nearly all of the world's palm oil supply -- expect their palm production to climb in 2014, fanning fears that their supply may outstrip food and fuel demand.

Indonesia said its 2013 palm oil output likely grew to 24.4 million tonnes and could rise further to 28 million tonnes in 2014, while No. 2 producer Malaysia expects to hit a record 19.4 million tonnes in 2013 and inch up to 19.5 million tonnes this year.

Despite the forecasts, traders said prices would likely balance out in the coming weeks after market players are done taking positions for the year ahead.

"It's the first day of 'real' trading. For a lot of traders, it's about starting up their positions again after closing books in 2013," said a trader with a foreign commodities brokerage in Malaysia.

"There's some manoeuvring around -- the first few days is not a good indication of where the market is going. We have to let things settle down first and let everybody get into the groove," the trader added.

The benchmark March contract on the Bursa Malaysia Derivatives Exchange had dropped 1.3 percent to 2,606 ringgit ($792) per tonne by Monday's close. Prices earlier hit 2,588 ringgit, the lowest level since Dec. 23.

Total traded volume stood at 47,264 lots of 25 tonnes, much higher than the usual 35,000 lots.

Prospects of higher production of competing oilseeds have dragged on U.S. and China soy markets tracked by palm oil.

Larger soybean crops would mean more volumes to be crushed into
soyoil, adding to global stockpiles.

The U.S. soyoil contract for March fell 0.6 percent in late Asian trade on Monday. The most active May soybean oil contract on the Dalian Commodities Exchange dropped 2.2 percent.

In other markets, Brent crude oil rose above $107 a barrel on Monday, rebounding after its biggest weekly fall in six months on news of the restart of a key Libyan oilfield.

Palm, soy and crude oil prices at 1012 GMT

Contract        Month    Last   Change     Low    High Volume
MY PALM OIL      JAN4    2555   -51.00    2555    2575     308
MY PALM OIL      FEB4    2593   -37.00    2574    2613    4664
MY PALM OIL      MAR4    2606   -34.00    2588    2629   21341
CHINA PALM OLEIN MAY4    5976 -102.00    5958    6062 611684
CHINA SOYOIL     MAY4    6696 -148.00    6692    6810 601708
CBOT SOY OIL     MAR4   38.36    -0.24   38.36   38.68    2915
NYMEX CRUDE      FEB4   94.47    +0.51   93.91   94.50   11960

Palm oil prices in Malaysian ringgit per tonne
CBOT soy oil in U.S. cents per pound
Dalian soy oil and RBD palm olein in Chinese yuan per tonne
Crude in U.S. dollars per barrel

($1=3.29 Malaysian ringgit)